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FCA confirms further support for motor finance and high cost credit customers

Emma Lunn
Written By:
Emma Lunn

The Financial Conduct Authority (FCA) has firmed up plans for a second payment holiday for car finance and high cost credit users who are struggling financially as a result of coronavirus.

Payment freeze measures originally came into effect from 27 April for a three-month period – these are due to end at the end of July. The regulator proposed further measures to help car finance and high cost credit customers at the beginning of July.

It was now confirmed further support for users of the following high cost credit products:

  • motor finance
  • buy-now pay-later (BNPL)
  • rent-to-own (RTO)
  • pawnbroking

The FCA says that firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.

If customers can afford to return to regular repayments, or make partial payments, it is in their best interest to do so.

But for those still facing temporary payment difficulties, firms should provide them with support by freezing or reducing payments to a level they can afford.

For BNPL customers, where a loan is within the promotional period, this will mean offering customers an additional extension to that period.

For pawnbroking agreements, where a loan is within the redemption period this will mean firms will need to offer a further extension to the redemption period. If the redemption period has already ended, this will mean agreeing not to sell the item during the payment deferral period.

Customers who have not yet had a payment freeze or requested an extension of an existing payment freeze can request this up until 31 October 2020.

The ban on repossessions will continue until 31 October 2020 – this applies to motor finance and RTO customers who need their vehicles or goods.

Christopher Woolard, interim chief executive at the FCA, said: “Our measures will ensure that people who are still facing temporary payment difficulties because of this pandemic, continue to have access to the help they need. However, if you can afford to start making repayments, you should.”

The FCA said that where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files.

However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

Nick Hill, money expert at the Money and Pensions Service, said: “The extension of support measures confirmed today, including for motor finance and high cost credit customers, could be helpful for people who are experiencing temporary payment difficulties, as we know that Covid-19 is continuing to affect people’s finances. It’s really important that people speak to firms to find out what options are available and appropriate for them, and consider what this will mean for their repayments in the long term.”